Tesla announced it’s cutting prices for some of its cars after the elimination of a federal tax credit. The U.S. government made sweeping changes to the Qualified Plug-in Electric Drive Motor Vehicle Tax Credit and has decided to phase it out slowly. In response, Tesla reduced some prices to keep buyers interested.
What’s the electric vehicle tax credit?
The electric vehicle (EV) tax credit is an incentive to encourage consumers to buy these type of vehicles, which tend to cost more than regular gasoline vehicles. Credits are available for fully electric and hybrid electric vehicles. The credit used to be worth $7,500, but it varies based on the car make and model. And it’s been reduced.
To qualify for the EV tax credit, you have to purchase a car that has an external plug-in source and weighs no more than 14,000 pounds. The car also has to meet emission standards. Every car manufacturer has to deal with the phase out of the tax credit that starts after they sell 200,000 eligible vehicles.
The credit for Tesla cars that were delivered before June 30, 2019, was $3,750. Teslas delivered between July 1, 2019, and Dec. 31, 2019, will receive a credit of $1,875. After December 31, Tesla vehicles won’t receive any EV tax credit. This means Tesla buyers in 2020 won’t receive any tax incentive whatsoever.
How to use the tax credit
You should talk to an accountant or a tax professional about taking the electric vehicle tax credit. But in general, you’ll need to fill out an additional form to use the credit when you’re doing taxes. There are different forms that depend on the type of vehicle you purchased.
It’s important to keep in mind that you can take the credit up to the specific amount. This means if you owe less than $7,500 in taxes, the credit won’t give you a refund check. The tax credit will only reduce the amount you owe.
Tesla’s response to the change
The $7,500 tax credit was an attractive incentive for potential Tesla buyers. Without it, the car manufacturer has lowered prices on the Model X, Model 3, and Model S. Now, buyers will save $2,000 on these vehicles. In addition, Tesla will pay the tax credit to those who order their cars before October 15.
Tesla has also released a Model 3 for $35,000 with a range of 220 miles and a maximum speed of 130 mph. This less expensive version of the car has a lower range and speed than the Model 3 Standard Range Plus. The car manufacturer shares it was able to make these changes because it switched to online sales exclusively. In response to this change, it’s planning to shut down most of the stores.
State and local tax credits
Although the federal EV tax credits are being phased out, you may still be able to take advantage of state and local credits. You can search the Alternative Fuels Data Center for laws and incentives online that apply to your specific location. Incentives include fuel rebates, grants, tax credits, and other benefits. Some states offer credits for both loaned and leased vehicles. Make sure you check what’s available in your state and talk to a qualified accountant or tax preparer.